KEPCO 'Buried in Debt'... Largest Internal Funding Shortfall Among 11 Asian Companies

Hampers investment in grid expansion and coal-fired power transition

LNG-centered power generation plan vulnerable to fuel price fluctuations

"Coal-fired power must be replaced with economically viable energy sources"

Exterior view of Korea Electric Power Corporation headquarters

KEPCO's role in the energy transition is expanding as South Korea scales up renewable energy and expands its power grid. However, KEPCO has the largest internal funding shortfall among 11 power companies in Asia. Observers say investment in shifting from coal-fired power to LNG-centered generation is vulnerable to fluctuations in international fuel prices, and should instead focus on economically viable energy sources.

In a recent report, "South Korea's Clean-Power Ambitions Raise the Stakes for KEPCO's Investment Plan," the Energy Shift Institute, an independent, nonprofit energy finance think tank specializing in Asia, analyzed South Korea's energy transition goals, KEPCO's generation and grid investment plans, and its financial position.

The report said the government has set a target of 100 GW of renewable energy capacity and a renewable share of at least 20% of power generation by 2030, but these policy priorities are not yet sufficiently reflected in KEPCO's published plans.

In its 2024 investor materials, KEPCO set a target of 37 GW of renewable energy capacity by 2030. However, its first-quarter 2026 materials listed the planned capacity of future renewable energy facilities as "undetermined." Based on KEPCO's first-quarter 2026 investor materials, investment in new and renewable energy is expected to total about $700 million, or 4.1% of this year's projected capital expenditure, while investment in coal and LNG is expected to total about $4 billion, or approximately 24%.

KEPCO does not have to build all of the country's planned 100 GW of renewable energy capacity. The report said that, as private power generators, state-owned power companies, other public institutions, and local governments participate in expanding renewable energy, KEPCO should play a central role in expanding and reinforcing the grid to connect these facilities. 

However, despite returning to profitability, KEPCO faces constraints on additional borrowing because of its high debt burden. According to the report, KEPCO's internal funding shortfall in 2025 was about $12.9 billion, the largest among 11 Asian power companies included in the comparison.

With grid expansion and investment in retiring, converting, and replacing coal-fired power plants all needed at the same time, the report recommended that the government establish a financing structure that does not further worsen KEPCO's financial position or place an excessive cost burden on consumers.

The report said the 12th Basic Plan for Electricity Supply and Demand should set out specific details on: how retired coal-fired power plants will be replaced with a clean and affordable mix of energy sources; the scale of grid infrastructure and flexibility resources needed to accommodate 100 GW of renewable energy and rising electricity demand; and the scale and timing of investment in power generation and the grid, along with how KEPCO, the government, and the private sector will share the financing burden.

The report also said that, from a financial perspective, the plan to replace coal-fired power with LNG-centered generation after the phaseout of coal requires scrutiny. Under the 11th Basic Plan for Electricity Supply and Demand, KEPCO's five power generation subsidiaries plan to add 20.1 GW of LNG capacity by 2038 to replace 28 aging coal-fired power plants. Greater reliance on LNG could increase the impact of rising and fluctuating international fuel prices on South Korea's power system.

If the increased costs are passed on through electricity rates, the burden on households and industry will grow. If KEPCO absorbs them, its debt and interest expenses will rise, potentially reducing its capacity to invest in the grid and renewable energy.

Christina Ng, a co-author of the report and managing director of the Energy Shift Institute, said, "Whenever fuel prices surge, the resulting burden accumulates on KEPCO's balance sheet, either reducing the funds available for investment in the grid and renewable energy or being passed on to households and manufacturers as higher costs." She added, "The upcoming 12th Basic Plan for Electricity Supply and Demand must provide a clear and specific roadmap for replacing coal-fired power with economically viable energy sources and reforming the power grid."

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Meanwhile, Solutions for Our Climate said it had advised on the report.

This content was produced with the assistance of AI translation services.